Expense Management 101: Your Guide to Expense Reporting

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expense management definition

Most expense management software uses OCR and automatic expense capture features. Therefore, manual errors in an automated expense management system are fewer. On the other hand, traditional expense management systems are infamous for such errors. Despite being the second-most challenging cost after employee salary, expenses in most organizations are still managed manually.

  • Hence, a well-documented expense management policy does half of the work for you.
  • If you have frequent traveling employees, you might need a highly rated vendor with quick responses, active live chats, and timely customer support.
  • Yes, although the majority are categorized as either operating or capital.
  • If you have daily allowances, weekly budgets, or travel expenses, you can get better control over your employee spending by setting custom limits on their corporate credit cards.
  • It caters to businesses of all sizes — startups, mid-size companies, and enterprises with no-code configuration and deployment in under six weeks.

This process, central to expense management, not only streamlines how employees pay for business expenses but also provides a comprehensive track of their spending through organized expense reports. For businesses, effective expense management is vital for maintaining financial health and achieving long-term success. By closely expense management definition monitoring and controlling expenses, businesses can optimize their operational costs and improve profitability. Expense management helps identify areas of overspending, inefficiencies, or potential cost savings. It allows for strategic decision-making, such as resource allocation, investment planning, and pricing strategies.

Benefits of an Expense Policy

For example, if the owner of a business travels to another location for a meeting, the cost of travel, the meals, and all other expenses that he/she has incurred may be added to the expense report. Consequently, these expenses will be considered business expenses and are tax-deductible. Typical business expenses include salaries, utilities, depreciation of capital assets, and interest expense for loans.

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As in the case of travel and expense policies, if the approval workflow is not well defined, the expense report might just not reach the right person and in the right time frame. This causes frustration, confusion, and delays in reimbursing employees for the money they spent from their pockets for your business. Employees’ recording of expenses includes employee expenses, paper receipts, hotel bills, or any paper trail that can be presented as proof of purchase. This is so because reimbursement of an expense claim is dependent on the provision of an expense claim or report. Expense management is the process adopted by a business or organization to treat, pay, verify and refund expenses initiated by its employees.

Managing your business expenses

In most organizations, business expenses are managed manually, using spreadsheets and paperwork, or the process is automated using expense management software. In both personal and corporate contexts, expense management contributes to financial stability and resilience. It helps individuals and businesses weather unexpected expenses, emergencies, or economic downturns.

What Is a Company Expense Policy?

Pluto aims not just to automate your processes but also to support your existing workflows. Then, be it purchase requests, accounts payable, or accounting, it strives to improve your processes by removing all the bottlenecks that cause chaos. While it does enhance the three core components of procurement—people, process, and paperwork, procurement management requires more than the adoption of software.

When that is done, the admin/manager is notified to accept or reject the expense. If the expense is accepted, it is reimbursed to the employee’s bank account in seconds. Manage your entire company’s T&E spending in one easy-to- use platform that employees love.

Choosing the Right Automation Partner

Replace petty cash vouchers with digital cash on hand management solution & Pluto’s unlimited corporate cards. It looks quite simple, but in reality, there are challenges at each step of the process that pose severe threats to the business’s stability and growth if not done right. Thus, it is essential to understand these challenges to build an efficient expense management system.

expense management definition

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